Seized material handover timing in s.153C cases: six-AY and ten-AY blocks recalculated, older assessment year notices set aside

For s.153C proceedings against a non-searched person, the HC held that the six-AY block is computed with reference to the AY relevant to the FY of handover of seized material to the jurisdictional AO, while the ten-AY "relevant assessment year" block is reckoned from the end of the AY so identified; applying this, notices for AYs 2010-11 to 2012-13 (and, where applicable, 2013-14) fell beyond the maximum ten-AY span and were set aside. On the Fourth Proviso to s.153A, the HC held the INR 50 lakh threshold may be satisfied "in aggregate" across the relevant AYs, and the AO's satisfaction must be recorded in the satisfaction note; the per-year threshold argument was rejected. The plea of "finality/closure" based on pre-2017 limitation was rejected.

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Issues Involved:
1. Identification and computation of the block of six and ten Assessment Years (AYs) under Section 153C.
2. Applicability of the 2017 Amending Act to AYs 2010-11 and 2011-12.
3. Satisfaction of the threshold conditions under the Fourth Proviso to Section 153A.
4. Date of commencement for computation of the six and ten-year block periods under Section 153C.

Summary of the Judgment:

1. Identification and Computation of the Block of Six and Ten AYs under Section 153C:
The court held that the six AYs under Section 153C should be computed from the date of receiving the books of account, documents, or assets seized by the jurisdictional Assessing Officer (AO) of the non-searched person, as per the First Proviso to Section 153C(1). This date is different from the date of the search, which is relevant for the searched person under Section 153A. The court affirmed the principles laid down in SSP Aviation Ltd. v. Deputy CIT and RRJ Securities Ltd. v. CIT, which were upheld by the Supreme Court in Jasjit Singh and Vikram Sujitkumar Bhatia. Consequently, the block of six AYs for List I (01 April 2021 to 31 March 2022) would be AYs 2016-17 to 2021-22, and for List II (01 April 2022 to 31 March 2023) would be AYs 2017-18 to 2022-23.

2. Applicability of the 2017 Amending Act to AYs 2010-11 and 2011-12:
The court rejected the argument that the 2017 Amending Act does not apply to AYs 2010-11 and 2011-12 because the period for assessment or reassessment had ended before 01 April 2017. The court emphasized that Sections 153A and 153C, which override Sections 139, 147, 148, 149, 151, and 153, do not prescribe a specific period within which a notice must be issued. The amendments introduced by the 2017 Amending Act, which expanded the block period to ten AYs, apply to all searches conducted after 01 April 2017. The court held that the legislative intent was clear in applying these provisions retroactively.

3. Satisfaction of the Threshold Conditions under the Fourth Proviso to Section 153A:
The court held that the threshold of INR 50 lakhs mentioned in the Fourth Proviso to Section 153A is a preliminary condition that the AO must be satisfied with before issuing a notice. The AO must form an opinion based on the material gathered during the search that the income likely to have escaped assessment amounts to or is likely to amount to INR 50 lakhs or more. This threshold can be satisfied on a cumulative basis across the relevant assessment years.

4. Date of Commencement for Computation of the Six and Ten-Year Block Periods under Section 153C:
The court reiterated that the date of commencement for computation of the six and ten-year block periods under Section 153C is the date of receipt of the books of account, documents, or assets seized by the jurisdictional AO of the non-searched person. This date is different from the date of the search, which is relevant for the searched person under Section 153A. The court held that the computation of the ten-year block period should be from the end of the AY relevant to the previous year in which the search was conducted.

Disposition:
The court quashed the impugned notices for AYs 2010-11, 2011-12, 2012-13, and 2013-14 in Lists I and II as they fall beyond the maximum ten-year block period. The court also quashed the impugned notices in WP(C) Nos. 400/2024, 384/2024, and 383/2024 for the same reason. However, in WP(C) 694/2024, the court quashed the notice but allowed the AO to re-examine the escaped income's likelihood of exceeding INR 50 lakhs. ITA 52/2024 filed by the Department was dismissed.

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